Re Uniti Group Ltd

Case [2022] FCA 671

FEDERAL COURT OF AUSTRALIA

Uniti Group Limited, in the matter of Unity Group Limited [2022] FCA 671

File number: VID 278 of 2022
Judgment of: BEACH J
Date of judgment: 7 June 2022
Date of publication of reasons: 8 June 2002
Catchwords: CORPORATIONS – scheme of arrangement – scheme concerning shares – two classes of shareholders – s 411(1) of the Corporations Act 2001 (Cth) – first Court hearing – orders for convening two separate meetings of shareholders
Legislation:

Corporations Act 2001 (Cth) ss 110E(2), 254T(1)(b), 254T(1)(c), 260A, 260B, 260C, 411(1), 412 and 1319

Federal Court (Corporations) Rules2000 rr 2.13(1), 2.15 and 3.4

Insolvency Practice Rules (Corporations) 2016 (Cth) s 75-15(2)

Cases cited:

Re Australian Pharmaceutical Industries Limited [2022] FCA 103

Re Crown Resorts Limited [2022] FCA 367

Re DWS Limited [2020] FCA 1590

Re Healthscope Ltd (2019) 139 ACSR 608

Re Navitas Limited [2019] WASC 180

Re QMS Media Limited [2019] FCA 2172

Re RXP Services Limited [2021] FCA 38

Re Zenith Energy Ltd [2020] WASC 266

Division: General Division
Registry: Victoria
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Number of paragraphs: 71
Date of hearing: 7 June 2022
Counsel for the Plaintiff: Mr P D Crutchfield QC and Mr B K Holmes
Solicitor for the Plaintiff: Clayton Utz
Counsel for the Bidder: Mr J J Rudd
Solicitor for the Bidder: Allens

ORDERS

VID 278 of 2022

IN THE MATTER OF UNITI GROUP LIMITED

UNITI GROUP LIMITED ACN 158 957 889

Plaintiff

ORDER MADE BY:

BEACH J

DATE OF ORDER:

7 JUNE 2022

OTHER MATTERS:

A.The Court notes that the Australian Securities and Investments Commission (ASIC) was provided with 14 days’ notice of the hearing of this application.

B.The Court is satisfied that ASIC has had a reasonable opportunity to:

(a)examine the terms of the proposed scheme of arrangement to which the application relates and a draft explanatory statement relating to that arrangement; and

(b)make submissions to the Court in relation to the proposed scheme of arrangement and the draft explanatory statement.

C.The Court notes the two letters from ASIC to the Directors of Uniti Group Limited each dated 6 June 2022 produced at the hearing.

THE COURT ORDERS THAT:

1.Pursuant to rule 2.13(1) of the Federal Court (Corporations) Rules 2000 (Cth) (Rules), MBC BidCo Pty Ltd ACN 658 690 343 has leave to be heard in this proceeding without becoming a party to it.

2.Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (the Act), the plaintiff, Uniti Group Limited (ACN 133 404 065) (Uniti), convene and hold the following two meetings of its shareholders to consider and, if thought fit, approve (with or without modification) a scheme of arrangement (Scheme) proposed between Uniti and its holders of fully-paid ordinary shares (Uniti Shareholders), the terms of which are set out in Annexure B to these orders:

(a)a meeting of Uniti Shareholders, other than Michael John Simmons, Michael John Simmons as trustee for the Luab Unit Trust and Geoff William Aldridge as trustee…

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AGLC
Re Uniti Group Ltd [2022] FCA 671
Case
[2022] FCA 671
Decision Date

CaseChat Overview and Summary

In the case of Re Uniti Group Ltd, the applicant, Uniti Group Limited, sought an order from the Federal Court of Australia to convene two separate meetings of its shareholders to consider and potentially approve a proposed scheme of arrangement. The scheme concerned the shares of Uniti, which had two distinct classes of shareholders. The court was tasked with determining whether the conditions for ordering the convening of the meetings had been met under section 411(1) of the Corporations Act 2001 (Cth). The applicant argued that the scheme was fair and properly presented, and that shareholders should have the opportunity to consider and vote on it. The legal issues before the court included whether the scheme met the necessary procedural and substantive requirements, and whether it was fair enough to allow shareholders to consider it.

The court found that the conditions for convening the meetings had indeed been satisfied. The scheme was in a conventional form, and there was no indication that it was so unfair that shareholders should be deprived of the opportunity to consider it. The scheme booklet, which detailed the advantages and disadvantages of the transaction, had been properly prepared and verified, and had been reviewed by the Australian Securities and Investments Commission (ASIC). The court concluded that the scheme was fit for consideration by the shareholders and that it was appropriate to exercise its discretion to order the convening of the meetings. The court made orders for MBC BidCo Pty Ltd to be heard in the proceeding without becoming a party, and for Uniti to convene two meetings of its shareholders to consider the scheme.

The final orders included provisions for the meetings to be held electronically and in person, the manner of convening the meetings, the documents to be sent to shareholders, and the voting process. The court also made orders for the publication of a notice of hearing in The Australian newspaper and set a date for the further hearing of the application. The scheme of arrangement was detailed in Annexure B to the orders.

Orders

Orders of the court

1. Pursuant to rule 2.13(1) of the Federal Court (Corporations) Rules 2000 (Cth) (Rules), MBC BidCo Pty Ltd ACN 658 690 343 has leave to be heard in this proceeding without becoming a party to it.

2. Pursuant to section 411(1) of the Corporations Act 2001 (Cth) (the Act), the plaintiff, Uniti Group Limited (ACN 133 404 065) (Uniti), convene and hold the following two meetings of its shareholders to consider and, if thought fit, approve (with or without modification) a scheme of arrangement (Scheme) proposed between Uniti and its holders of fully-paid ordinary shares (Uniti Shareholders), the terms of which are set out in Annexure B to these orders:

(a) a meeting of Uniti Shareholders, other than Michael John Simmons, Michael John Simmons as trustee for the Luab Unit Trust and Geoff William Aldridge as trustee for the Arsenal Aldridge Trust (together the Rollover Shareholders), such meeting to be held at 9.30 am (Melbourne time) on Friday, 15 July 2022 (General Scheme Meeting); and

(b) a meeting of the Rollover Shareholders (Rollover Scheme Meeting), such meeting to be held on Friday, 15 July 2022 immediately after the General Scheme Meeting.

3. The General Scheme Meeting is to be conducted electronically through an online platform without Uniti Shareholders being physically present, such online platform to be accessed in accordance with the instructions included in the Notice of General Scheme Meeting to be sent to shareholders in accordance with order 5 below.

4. The Rollover Scheme Meeting is to be held at 22 Salmon Street, Port Melbourne, Victoria.

5. Pursuant to s 411(1) and s 1319 of the Act, the General Scheme Meeting be convened by sending on or before 13 June 2022:

(a) an email to each Uniti Shareholder who has nominated an electronic address for the purposes of receiving documents from Uniti (Electronic Recipients) (or, in the case of joint holders, to the holder whose name appears first in Uniti’s register), such email to be substantially in the form of pages 16 and 17 of annexure NSJ-1 to the affidavit of Nakul Joglekar dated 2 June 2022 (Joglekar Affidavit), which contains hyperlinks to:

(i) a website from which the Electronic Recipient can download an electronic copy of the Scheme Booklet (as defined in order 6 below);

(ii) a website from which the Electronic Recipient can download an electronic copy of a document substantially in the form of the document entitled "Online Shareholders’ Meeting Guide 2022", a copy of which is at pages 12 to 15 of annexure NSJ-1 to the Joglekar Affidavit (Online Meeting Guide);

(iii) an online portal or website that is accessible by the Electronic Recipient and which enables the Electronic Recipient to lodge their proxy for the General Scheme Meeting online; and

(iv) an online portal or website that is accessible by the Electronic Recipient to listen to and participate in the General Scheme Meeting online;

(b) the following hard-copy documents to each Uniti Shareholder who is not an Electronic Recipient (or, in the case of joint holders, to the holder whose name appears first in Uniti's register) (Letter Recipient):

(i) a letter, which is substantially in the form of pages 18 and 19 of annexure NSJ-1 to the Joglekar Affidavit, (Letter) setting out URL addresses which provide access to:

A. an electronic copy of the Scheme Booklet;

B. an electronic copy of a document substantially in the form of the Online Meeting Guide; and

C. an online portal or website that is accessible by the Letter Recipient to listen to and participate in the Scheme Meeting online;

(ii) a personalised hard copy proxy/voting form for the General Scheme Meeting (General Proxy Form), substantially in the form of pages 20 and 21 of Annexure NSJ-1 to the Joglekar Affidavit; and

(iii) a prepaid envelope for the return of the completed General Proxy Form.

(c) the following hard-copy documents to any Uniti Shareholder, who has elected under s 110E(2) of the Act to be sent documents in physical form:

(i) the Letter;

(ii) the Scheme Booklet;

(iii) the Online Meeting Guide;

(iv) the General Proxy Form; and

(v) a prepaid envelope for the return of the completed General Proxy Form.

6. The Scheme Booklet is a document substantially in the form of the Updated Final Draft Scheme Booklet at pages 7 to 227 of annexure PGS-2 to the affidavit of Peter Sise dated 6 June 2022 (including appendices A to E of those pages).

7. Pursuant to s 411(1) and s 1319 of the Act, the Rollover Scheme Meeting be convened by sending on or before 13 June 2022 to each Rollover Shareholder the following hard-copy documents:

(a) the Letter;

(b) a personalised hard copy proxy/voting form for the Rollover Scheme Meeting, substantially in the form of pages 22 and 23 of annexure NSJ-1 to the Joglekar Affidavit; and

(c) a prepaid envelope for return of the completed proxy form.

8. Hardcopy documents be sent:

(a) in the case of Uniti Shareholders whose registered address is within Australia, by prepaid ordinary post addressed to the relevant addresses recorded in Uniti’s register; and

(b) in the case of Uniti Shareholders whose registered address is outside Australia, by airmail or international courier service addressed to the relevant addresses recorded in Uniti’s register.

9. Compliance with r 2.15 of the Rules be dispensed with, except in so far as that rule applies r 75-15(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth).

10. Voting on any resolution(s) to approve the Scheme is to be conducted by way of a poll.

11. Uniti Shareholders (other than the Rollover Shareholders) whose names are recorded in the register of members of Uniti at 7:00 pm (Melbourne Time) on 13 July 2022 will be eligible to vote at the General Scheme Meeting.

12. Rollover Shareholders whose names are recorded in the register of members of Uniti at 7:00 pm (Melbourne Time) on 13 July 2022 will be eligible to vote at the Rollover Scheme Meeting.

13. A proxy in respect of the General Scheme Meeting or the Rollover Scheme Meeting will be valid and effective if, and only if, the proxy form is completed and delivered in accordance with its terms or a proxy is lodged online in accordance with the relevant instructions by 9.30 am (Melbourne time) on 13 July 2022.

14. Graeme Barclay or failing him, John Lindsay, be Chairperson of the General Scheme Meeting and the Rollover Scheme Meeting.

15. The Chairperson of the General Scheme Meeting and the Rollover Scheme Meeting shall have the power to adjourn each meeting to such time, date and place as he considers appropriate.

16. Compliance with r 3.4 and Form 6 of the Rules is dispensed with.

17. Uniti publish a Notice of Hearing in The Australian newspaper, in substantially the form that appears at Annexure A hereto, not later than 5 days prior to the date fixed for the hearing of any application to approve the Scheme.

18. The further hearing of the Originating Process is adjourned to the Honourable Justice Beach at 10.15 am on Thursday, 21 July 2022.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE A

Notice of hearing to approve compromise or arrangement

TO all the members of Uniti Group Limited ACN 158 957 889 (Uniti).

TAKE NOTICE that at 10.15 am (Melbourne time) on Thursday, 21 July 2022, the Federal Court of Australia at Melbourne VIC 3000 will hear an application by Uniti seeking the approval of a compromise or arrangement between Uniti and its members if agreed to by resolution(s) to be considered, and, if thought fit, passed by the meetings of its members to be held on Friday, 15 July 2022.

If you wish to oppose the approval of the compromise or arrangement, you must file and serve on Uniti a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on Uniti at its address for service at least 1 day before the date fixed for the hearing of the application.

The address for service of Uniti is:

Attention: Fred Prickett

c/- Clayton Utz

Level 18, 333 Collins Street

MELBOURNE VIC 3000

Service via email will be accepted: fprickett@claytonutz.com

ANNEXURE B : Scheme of Arrangement

[The order entered is available on the Commonwealth Courts Portal, which attaches the Scheme]

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In summary and accordingly, I do not need to trouble myself further with this question.Conclusion In summary, the conditions enlivening my power to order the convening of the necessary scheme meetings have been satisfied. Further, this is a clear case for the exercise of my discretion to make orders convening the meetings. First, the terms of the Scheme are in a conventional form. Second, there is no reason why the Scheme, if considered and adopted by members, is not of such a nature as would be likely to be approved by the Court at the second hearing. Third, Uniti shareholders are to be presented with a detailed analysis by the independent expert of the transaction and its advantages and disadvantages. Fourth, the Scheme has been recommended by the directors of Uniti. Fifth, the scheme booklet provides a detailed description of the Scheme and its advantages and disadvantages, appears to meet all of the statutory requirements, has been properly prepared and verified by Uniti and MBC, and has been examined by ASIC for the purposes of being registered. Sixth, it cannot be said that the Scheme appears on its face so blatantly unfair or otherwise inappropriate that Uniti shareholders should be deprived of the opportunity to consider and vote on it. Seventh, I have been provided with copies of two letters from ASIC to Uniti’s directors both dated 6 June 2022. One letter concerns Uniti’s use of 31 December 2021 half-yearly accounts in the explanatory statement contained in the scheme booklet dealing with the necessary ASIC waiver. I need say nothing further about this. The other letter constitutes the standard indication of intent concerning a proposed statement under s 411(17)(b). I should also say for completeness that on the current material there is no Chapter 6 concern of the type referred to in s 411(17)(a) that has presently (at least) excited my interest. Finally, I do not need or intend to formally approve the explanatory statement given that it must be registered in any event by ASIC (s 412(6)). For these reasons I made the necessary orders.

Ratio Decidendi

Legal Principle Established

I should also say that MBC intends to satisfy its obligations under clause 4.9 of the SID by advancing Uniti the aggregate cash amount of the permitted dividend, if Uniti decides to pay the dividend. The dividend funds must be paid by MBC to Uniti at least one business day prior to the payment of the permitted dividend. The permitted dividend is expected to be paid on the date of implementation of the Scheme.The Scheme is fit for consideration In my view the Scheme is one which is fit for consideration by the proposed meetings of Uniti shareholders. The principles which apply at this first stage are well known. As I summarised in Re RXP Services Limited [2021] FCA 38 at [18]:Now as I have said on more than one occasion, my function on an application to order the convening of a meeting is supervisory. At this stage I should generally confine myself to ensuring that certain procedural and substantive requirements have been met including dealing with adequate disclosure, but with limited consideration of issues of fairness. But having said that, it is appropriate to consider the merits or fairness of a proposed scheme at the convening hearing if the issue is such as would unquestionably lead to a refusal to approve a proposed scheme at the approval hearing, that is, the proposed scheme appears now to be on its face “so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further” (Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at [44] per French J). But in the present case, in my view there is no issue arising from the Scheme which would unquestionably lead to a refusal to approve the Scheme at the approval hearing. It cannot be said that the Scheme on its face is “so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further”. Put another way, the Scheme is not of such a nature and cast in such terms that if it receives the support of the statutory majorities at the meeting, nevertheless I would not be likely to approve it at the second court hearing. It is not the Court’s role to usurp the shareholders’ decision whether to agree to a scheme by attempting to impose its own commercial judgment. And the question whether to accept particular consideration for shares is quintessentially a commercial matter for the members of Uniti to assess. They ought not to be prevented from having the opportunity to do so provided that I can be satisfied that they are acting on sufficient information and with time to consider what they are voting on. I am so satisfied. Now I should say that in the context of addressing the question of whether the Scheme is fit for consideration by the members, Uniti has raised the following aspects of the Scheme for my attention:(a)the question of separate classes;(b)the recommendation of Uniti’s board;(c)performance rights and options;(d)performance risk;(e)the break fee;(f)the exclusivity period;(g)the deemed warranties;(h)financial assistance; and(i)the purpose of the Scheme being not to avoid Chapter 6 of the Act.